Loading judgment…
Facts
A survey was conducted at the assessee's diagnostic center, revealing undisclosed professional receipts of Rs. 49,64,120/- for FY 2018-19. The assessee admitted these receipts were not accounted for and agreed to revise the return, which was filed after the due date. The CIT(A) initiated penalty proceedings under Section 270A for under-reporting and misreporting.
Held
The Tribunal held that the assessee's revised return was filed after the due date and the disclosure was a consequence of survey detection, not voluntary. The assessment of income was greater than the processed return, attracting Section 270A(2)(a). The appeal was dismissed.
Key Issues
Whether the penalty levied under Section 270A for under-reporting and misreporting of income is justified when the assessee filed a revised return after a survey and admitted suppressed receipts due to detection.
Sections Cited
133A, 143(2), 142(1), 69A, 115BBE, 270A, 274, 139(5), 143(1), 271(1)(c), 263, 132
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, PUNE BENCH “SMC”, PUNE
Before: JUSTICE (RETD.) C V BHADANG & SHRI R. K. PANDA
Assessment year : 2019-20 Rajendra Chandrakant Chinchnikar ACIT, Central Circle, 2165, B Ward, Koshti Galli, Vs. Kolhapur Mangalwar Peth, Pune – 416012 PAN: ACPPC3559D (Appellant) (Respondent) Assessee by : Shri Tanzil Padvekar Department by : Shri Milind Debaje, JCIT Date of hearing : 25-08-2025 Date of pronouncement : 29-09-2025 O R D E R PER R.K. PANDA, VP:
This appeal filed by the assessee is directed against the order dated 07.11.2024 of the Ld. CIT(A), Pune-11 relating to assessment year 2019-20.
Facts of the case, in brief, are that the assessee is an individual engaged in running a Diagnostic Centre under the name & style ‘Shrutika Imaging & Diagnostic Centre’. He filed his original return of income on 30.10.2019 declaring total income of Rs.41,42,650/-. A survey u/s 133A of the Act was conducted in the case of the assessee on 5th, 6th and 7th February, 2020 during which certain documents were impounded. The return filed by the assessee was selected for complete scrutiny and accordingly statutory notices u/s 143(2) and 142(1) of the Act were issued and served on the assessee in response to which the assessee appeared from time to time and filed various details.
The Assessing Officer noted that during the course of survey proceedings 4 registers for the financial year 2018-19 and 11 registers for the financial year 2019- 20 were found which contained the details of cash received from the patients on account of medical services by the assessee. The total amount as per these registers for the financial year 2018-19 was Rs.49,64,120/- and for the financial year 2019-20 was Rs.1,58,53,820/-. The statement of the assessee was recorded during the course of survey wherein he had admitted that the receipts of Rs.49,64,120/- for financial year 2018-19 are his professional receipts which were not accounted for in his regular books of account. He had submitted that he will revise his return of income for the financial year 2018-19 and pay due taxes thereon. Subsequently the assessee filed his revised return on 30.06.2020 declaring total income of Rs.90,68,610/- for assessment year 2019-20 wherein he declared the additional income admitted by him during the survey proceedings. The Assessing Officer completed the assessment determining such additional income declared during the course of survey as deemed income u/s 69A r.w.s. 115BBE of the Act.
The assessee filed an appeal before the Ld. CIT(A) against the above addition who held that the professional receipts amounting to Rs.49,64,120/-, which were not declared in the original return of income, cannot be taxed as deemed income u/s 69A but are taxable as professional receipts. He, however, held that the assessee has underreported his income which is in consequence of misreporting thereof as per provisions of section 270A(9)(e) and therefore, initiated penalty proceedings u/s 270A and issued show cause notice u/s 274 r.w.s. 270A.
The assessee in response to the notice issued u/s 270A by the Ld. CIT(A) submitted that he has declared the additional income voluntarily and in a transparent manner by revising the return of income after the survey and disclosed the additional income so found during the course of survey accurately. The assessee complied with the tax laws by paying due taxes on the additional income disclosed during the course of survey and there is no loss to the Revenue. Relying on various decisions it was argued that the penalty provisions are not applicable for voluntary disclosure made during the course of survey.
However, the Ld. CIT(A) was not satisfied with the arguments advanced by the assessee. He noted that the revised return filed by the assessee on 30.06.2020 declaring the income of Rs.90,68,610/-, which includes the additional income declared in the survey, has been filed after the due date prescribed u/s 139(5) of the Act and therefore, is not a valid return. He further noted that the assessee has failed to record the receipts of Rs.49,64,120/- in his books of account having a bearing on the total income and therefore, the present case clearly falls under the provisions of section 270A(9)(e) of the Act and it is a case of underreporting of income in consequence of misreporting thereof. Further since the income assessed is greater than the income determined in the return processed u/s 143(1)(a), therefore, this case falls u/s 270A(2)(a) of the Act. Therefore, the assessee had under-reported his income to the tune of Rs.49,64,120/- as per the provisions of section 270A(2)(a) r.w.s. 270A(3)(i)(a) of the Act.
So far as the contention of the assessee that he has voluntarily disclosed the income of Rs.49,64,120/- is concerned, he held that the assessee admitted the same only after it was detected during the course of survey and therefore, the assessee is not eligible for exemption under clause (a) to (e) of section 270A(6) of the Act. Further, the assessee also failed to offer any bonafide explanation as to why he had not offered the receipts of Rs.49,64,120/- in his original return of income. Distinguishing the various decisions cited by the assessee and relying on various other decisions, the Ld. CIT(A) held that the assessee is liable to pay penalty of Rs.35,92,000/- u/s 270A being 200% of the amount of tax payable on the underreported income of Rs.49,64,120/-.
Aggrieved with such order of the Ld. CIT(A), the assessee is in appeal before the Tribunal by raising the following grounds:
1. On the facts and in law, the Learned Commissioner of Income Tax (Appeal) [in short Ld. CIT(A)] erred in levying Penalty under Section 270A of the Act at 200% of Rs.35,92,000/-.
2. On the facts and in law, the Ld. CIT(A) erred in levying Penalty and passing order under Section 270A of the Act, when the alleged addition has been accepted by the Learned Assessing Officer (in short Ld. AO) and Ld. CIT(A) wherein while allowing ground No. 3 in the quantum proceeding before CIT(A). Since, the addition has become debatable as the Ld. CIT(A) has granted relief under Section 69A of the Act.
3. On the facts and in law, the Ld. CIT(A) erred by failing to appreciate that the Assessee declared the income in its revised return of income and therefore, provisions of Section 270A of misreporting or underreporting shall not be applicable.
4. On the facts and in law, the Ld. CIT(A) erred by failing put to the notice of the Appellant of limb under which the Penalty was sought to be levied under Section 270A of the Act.
5. On the facts and in law, the impugned Notice for levy of Notice under Section 270A of the Act and impugned Order under Section 270A of the Act are bad in law and without jurisdiction. Since, the Ld. CIT(A) did not have power to levy penalty under Section 270A of the Act when Ld. AO has already issued Notice for levy of Penalty under Section 271AAC(1) of the Act.
6. On the facts and in law, since, the income has been accepted by Ld. AO as well as by the Ld. CIT(A) [in Ground No. 3 of its Order], the Penalty shall not have any ground for its levy. Therefore, the impugned Order passed under Section 270A is bad in law and liable to the quashed and set aside.
7. On the facts and in law, the Ld. CIT(A) erred in imposing penalty under Section 270A of the Act without jurisdiction. Since, the Ld. CIT(A) has accepted the stand taken by the Appellant in facts peculiar in the present case, the impugned Order passed under Section 270A of the Act is bad in law.
8. The appellant craves, leave to add to alter, modify, revise, or delete any ground (s) in the interest of justice.
The Ld. Counsel for the assessee strongly challenged the order of the Ld. CIT(A) levying the penalty of Rs.35,92,000/- u/s 270A of the Act. He referred to the order of the Ld. CIT(A) wherein he has held that the revised return filed on 30.06.2020 was beyond the prescribed time and therefore it is not a valid return. He submitted that the above observation of Ld. CIT(A) is factually as well as legally incorrect. Referring to the CBDT Circular explaining the time limit for filing of revised return for assessment year 2019-20 to 30.11.2020, copy of which is placed at page 29 of the paper book, he submitted that the revised return filed by the assessee was well within time and valid in law. Referring to pages 47 to 50 of the paper book, he submitted that the notice issued u/s 143(2) dated 28.09.2020 was on the basis of revised return filed on 30.06.2020. This itself confirms that the department had accepted the revised return as a valid return and therefore, the finding of the Ld. CIT(A) that the return is not valid is not in accordance with law. Referring to pages 30 to 46 of the paper book, he submitted that the revised return was duly processed u/s 143(1) of the Act vide intimation dated 27.08.2020 wherein the income from business and profession was accepted at Rs.96,55,083/- as against Rs.93,75,983/-. Therefore, once the revised return has been processed it cannot be said that the same is invalid.
Referring to the provisions of section 270A of the Act, he submitted that a plain reading of the same would show that unless an assessee is first found to have ‘under-reported income’ within the scope of sub-section (2), penalty u/s 270A cannot be levied. He submitted that sub-section (9) relating to ‘mis-reporting’ becomes relevant only if sub-section (2) is attracted. He submitted that in the instant case it cannot be disputed that the assessee’s case does not fall under any of clauses (b) to (g) of section 270A(2) of the Act. He submitted that the only possible clause is section 270A(2)(a) which applies where the income assessed is greater than the income determined in the return processed u/s 143(1)(a) of the Act. He submitted that in the instant case the intimation u/s 143(1) of the Act has accepted the income declared by the assessee in the revised return. Therefore, there is no difference in the returned income and the assessed income. In such circumstances, the assessee cannot be held to have under-reported his income within the meaning of section 270A(2) of the Act. He accordingly submitted that invocation of section 270A(9) of the Act for mis-reporting does not arise and therefore, the order of the Ld. CIT(A) levying the penalty of Rs.35,92,000/- u/s 270A should be deleted.
Referring to the decision of the Hon’ble Delhi High Court in the case of PCIT vs. Neeraj Jindal (2017) 393 ITR 1 (Del), he submitted that the Hon’ble High Court in the said decision has held that when an assessee has filed revised return after search has been conducted, and such revised return has been accepted by the Assessing Officer, then merely by virtue of the fact that such return showed a higher income, penalty under section 271(1)(c) cannot be automatically imposed.
Referring to the decision of the Chennai Bench of the Tribunal in the case of KAG India (P.) Ltd. vs. PCIT (2025) 170 taxmann.com 45 (Chennai-Trib.), he submitted that unless a person is considered to have under-reported his income as contemplated by sub-section (2) of section 270A, he cannot be found to have attracted penalty under section 270A as envisaged for 'under-reporting of income in consequence of mis-reporting'. He accordingly submitted that the order of the Ld. CIT(A) levying penalty u/s 270A should be deleted and the ground raised by the assessee be allowed.
The Ld. DR on the other hand heavily relied on the order of the Ld. CIT(A). Referring to the order of the Ld. CIT(A) dated 07.11.2024, he drew the attention of the Bench to the relevant questions put to the assessee and his reply where he has admitted that the receipts mentioned in the registers impounded during the course of survey are not reflected in the books of account and they were kept separately. He submitted that due to the survey only the unaccounted receipts were detected and the assessee came forward to offer the suppressed receipts as his additional income. Had there been no survey, the assessee could not have disclosed such income. He submitted that the Ld. CIT(A) has rightly levied the penalty u/s 270A by giving justifiable reasons and therefore, the same should be upheld.
We have heard the rival arguments made by both the sides, perused the orders of the Assessing Officer and the Ld. CIT(A) and the paper book filed on behalf of the assessee. We have also considered the various decisions cited before us. We find the assessee in the instant case has filed his original return of income on 30.10.2019 declaring total income of Rs.41,42,650/-. A survey u/s 133A of the Act was conducted at the business premises of the assessee from 5th to 7th February, 2020 during which certain registers were impounded containing the undisclosed professional receipts according to which such undisclosed receipts for the year under consideration were Rs.49,64,120/-. When confronted the assessee admitted that the receipts contained in the said registers are not recorded in the books of account and kept separately. He, therefore, admitted to revise the return of income by offering the additional income and pay the due taxes thereon. Accordingly the assessee filed his revised return on 30.06.2020 by declaring total income of Rs.90,68,610/-. We find the Assessing Officer, in the order u/s 143(3) dated 20.09.2021 treated the additional income of Rs.49,64,120/- as deemed income u/s 69A r.w.s. 115BBE of the Act.
We find when the assessee challenged the order of the Assessing Officer, the Ld. CIT(A) vide order dated 07.11.2024 held that the said income cannot be taxed as deemed income u/s 69A r.w.s. 115BBE of the Act since these are professional receipts. He, however, initiated penalty proceedings u/s 270A for under-reporting of income in consequence of misreporting as per the provisions of section 270A(9)(e) of the Act. While doing so, he observed that the revised return filed by the assessee on 30.06.2020 is (a) beyond the due date prescribed u/s 139(5) of the Act and therefore, is not a valid return; (b) the assessee failed to record the receipts of Rs.49,64,120/- in his books of account having a bearing on the total income and therefore, the case clearly falls under the provisions of section 270A(9)(e) and it is a case of under-reporting of income in consequence of misreporting thereof; and (c) the undisclosed income was offered only on account of its detection during the course of survey. In view of the above, he levied the penalty of Rs.35,92,000/- u/s 270A of the Act.
It is the submission of the Ld. Counsel for the assessee that in view of the CBDT Notification dated 30.09.2020, the due date has been extended for filing the revised return for assessment year 2019-20 to 30.11.2020 and therefore, such revised return filed on 30.06.2020 is a valid return. Further, notice u/s 143(2) was issued for scrutiny of the revised return filed on 30.06.2020 and such revised return was also processed u/s 143(1) of the Act on 27.08.2020. It is his submission that since there is no difference between the income determined in the intimation u/s 143(1) and the assessed income, therefore, it cannot be said that the assessee has under-reported his income within the meaning of section 270A(2) and therefore, invocation of section 270A(9) for misreporting does not arise.
We do not find any merit in the arguments of the Ld. Counsel for the assessee that the assessee is not liable for penalty u/s 270A of the I T Act, 1961. A perusal of the statement recorded of the assessee during the course of survey clearly and categorically shows that the receipts mentioned in the registers impounded were not reflected in the books of account since they were kept separately. Only when the same were confronted to the assessee, the assessee offered to disclose the same and pay the due taxes thereon. The relevant questions put by the survey team and answer of the assessee to the same are reproduced as under: “Q.No.13. As you have stated in the answer to your question you are maintaining dual accounts. So the receipts in the abovementioned registers (for the FY 2018-19 Rs.49,64,120/- and for FY 2019-20 Rs.1,58,53,820/-) are not accounted in your books. So what tax treatment you give to these receipts? Ans. For the FY 2018-19 The receipts of Rs.49,64,120/- were not accounted for in my books and so these are my professional receipts which was not accounted for in my regular books of accounts. I will revise my return for the FY 2018-19 and will pay the due taxes thereon. For the FY 2019-20 books of accounts are not yet finalized. I will consider these professional receipts of Rs.1,58,53,820/- in my regular books of accounts and will pay the due taxes thereon.
Q. No. 14 In case of the above receipts do you incur any expenditure? If yes, please state the same with supporting documentary evidences Ans. No, I have not incurred any additional expenditure corresponding to the above professional receipts. All my expenditures are already accounted for in my regular books of accounts.”
Under these circumstances, we have to see as to whether the Ld. CIT(A) was justified or not in levying the penalty of Rs.35,92,000/- u/s 270A of the Act. The provisions of section 270A as stood at the relevant time read as under:
“Penalty for under-reporting and misreporting of income. 270A. (1) The Assessing Officer or the Commissioner (Appeals) or the Principal Commissioner or Commissioner may, during the course of any proceedings under this Act, direct that any person who has under-reported his income shall be liable to pay a penalty in addition to tax, if any, on the under-reported income. (2) A person shall be considered to have under-reported his income, if— (a) the income assessed is greater than the income determined in the return processed under clause (a) of sub-section (1) of section 143; (b) the income assessed is greater than the maximum amount not chargeable to tax, where no return of income has been furnished 15[or where return has been furnished for the first time under section 148]; (c) the income reassessed is greater than the income assessed or reassessed immediately before such reassessment; (d) the amount of deemed total income assessed or reassessed as per the provisions of section 115JB or section 115JC, as the case may be, is greater than the deemed total income determined in the return processed under clause (a) of sub-section (1) of section 143; (e) the amount of deemed total income assessed as per the provisions of section 115JB or section 115JC is greater than the maximum amount not chargeable to tax, where 16[no return of income has been furnished or where return has been furnished for the first time under section 148]; (f) the amount of deemed total income reassessed as per the provisions of section 115JB or section 115JC, as the case may be, is greater than the deemed total income assessed or reassessed immediately before such reassessment; (g) the income assessed or reassessed has the effect of reducing the loss or converting such loss into income. (3) …… (4) …... (5) ……
(6) ….. (7) …. (8) …. (9) The cases of misreporting of income referred to in sub-section (8) shall be the following, namely:— (a) misrepresentation or suppression of facts; (b) failure to record investments in the books of account; (c) claim of expenditure not substantiated by any evidence; (d) recording of any false entry in the books of account; (e) failure to record any receipt in books of account having a bearing on total income; and (f) failure to report any international transaction or any transaction deemed to be an international transaction or any specified domestic transaction, to which the provisions of Chapter X apply.”
As per sub-section (2)(a) to section 270A, a person shall be considered to have under-reported his income, if the income assessed is greater than the income determined in the return processed under clause (a) of sub-section (1) of section 143. As per the provisions of sub-section (9)(e), the case of misreporting of income referred to in sub-section (8) shall be failure to record any receipt in the books of account having a bearing on the total income.
It is an admitted fact that the assessee had filed his original return of income on 30.10.2019 which was duly processed on 19.02.2020. The assessee has also not revised his return of income voluntarily by declaring the receipts which were suppressed before the date of survey. It is also an admitted fact that only due to the survey the suppressed receipts were detected from the impounded books which were kept separately and the assessee offered to declare such suppressed receipts as his additional income and pay the due taxes thereon and accordingly filed his revised return on 30.06.2020. Therefore, although the revised return filed by the assessee was within the time extended by the CBDT vide notification dated 30.09.2020, however, the assessee cannot say that he has offered the income voluntarily. It is only on account of survey when the suppressed receipts were detected that the assessee offered to admit the same as additional income and agreed to pay the due taxes thereon by filing a revised return. Therefore, the provisions of section 270A of the Act, in our opinion, are clearly attracted for under-reporting of income in consequence of misreporting as per the provisions of section 270A of the Act.
The two decisions relied on by the Ld. Counsel for the assessee in our opinion are not applicable to the facts of the present case. So far as the decision of Hon’ble Delhi High Court in the case of PCIT vs. Neeraj Jindal (supra) is concerned, the same was under the provisions of section 271(1)(c) of the Act whereas in the instant case, the penalty has been levied under the newly inserted provisions of section 270A of the Act.
So far as the decision of the Chennai Bench of the Tribunal in the case of KAG India (P.) Ltd. vs. PCIT (supra) is concerned, there also it was a case under the provisions of section 263 of the Act where the PCIT has held the assessment order to be erroneous and prejudicial to the interest of Revenue on account of non- initiation of penalty u/s 270A(9)(e) of the Act on certain amounts on account of additions made by the Assessing Officer on the basis of search u/s 132 of the Act.
Further, one of the findings of the Tribunal was also that there was no intimation issued by the Revenue u/s 143(1) of the Act for which the Tribunal set aside the order of the PCIT. However, the facts in the instant case are altogether different. It is not a case of search but a case of survey where it was detected that the assessee has suppressed its receipts which were recorded in some registers which were kept separately. Therefore, the above two decisions are not applicable to the facts of the present case.
So far as the argument of the Ld. Counsel for the assessee that the only possible clause in the instant case is section 270A(2)(a) according to which the penalty is leviable when the income assessed is greater than the income determined in the return processed u/s 143(1)(a) of the Act and since in the instant case there is no difference between the assessed income and returned income for which no penalty is leviable is concerned, we do not find any merit in the above arguments of the Ld. Counsel for the assessee. In our opinion, the difference between the return processed u/s 143(1)(a) of the original return and the final assessed income will have to be considered for levy of penalty, otherwise, any person can suppress his income and only after being detected, offer such suppressed income as additional income and can always argue that no penalty is leviable. This, in our opinion, is not the intention of the Statute. In this view of the matter and in view of the detailed reasoning given by the Ld. CIT(A) on this issue, we uphold the order of the Ld. CIT(A) levying the penalty of Rs.35,92,000/-.
The Ld. Counsel for the assessee has not made any argument on the issue of limb under which the penalty was sought to be levied u/s 270A, therefore, the grounds challenging the validity of penalty on account of non-mentioning of limb is also dismissed. The grounds raised by the assessee are accordingly dismissed.
In the result, the appeal filed by the assessee is dismissed.
Order pronounced in the open Court on 29th September, 2025.